Financial Technology

Swindler who helped Google probe gets 6 years

PROVIDENCE, Rhode Island (AP) — A career con artist who helped with a criminal investigation that led to Google (News - Alert) Inc. forfeiting $500 million was sentenced Friday to nearly six years in prison for his role in a multimillion dollar fraud scheme targeting 83 customers and a credit card processing company.

David Whitaker's cooperation with the Google investigation was called extraordinary several times during his sentencing in U.S. District Court in Providence. Assistant U.S. Attorney Andrew Reich said that because of the probe, millions of Americans have been protected from rogue online Canadian pharmacies advertising prescription drugs through Google's AdWords program.

Google forfeited the $500 million to avoid criminal prosecution for accusations it improperly profited from ads placed by the pharmacies.

Whitaker, a 36–year–old Virginia resident who has been jailed since 2008, said before sentencing that the probe changed his life. He said he learned honesty, integrity and how to be a better person from investigators on the case. He said he also shed his misconception that he was a victim.

"I hurt a lot of people, and I've made a mess of my life," said Whitaker, dressed in a beige prison clothes. He added: "My apology would be to change."

Prosecutors also were complementary of Whitaker.

"But for his cooperation, this would not have taken off," Reich said.

Judge William E. Smith also ordered Whitaker to pay more than $10 million in restitution, including more than $2.2 million that he and a co–defendant must pay to the credit card processing company. Whitaker faced up to 65 years in prison for his crimes, but Smith agreed to recommendations by his lawyer and Reich to make him eligible for a less severe sentence. Whitaker will be credited for the nearly four years he's spent in prison, but still faces two years and two months of imprisonment.

Authorities arrested Whitaker in California after he was expelled from Mexico in 2008. Authorities allege his Rhode Island electronics equipment provider, Mixitforme Inc., bilked $7 million to $20 million from customers and a credit card processor.

After his arrest, Whitaker disclosed to investigators that he had been selling prescription drugs online in Mexico with the help of Google's AdWords program, Reich said. Whitaker described how he developed relationships with Google employees who allowed him to place ads for drugs obtained from overseas without a prescription, Reich said.

Whitaker helped investigators construct phony websites that purported to sell the drugs, officials said. Then, an undercover investigator would tell Google employees who were creating the advertising for the products that they were manufactured overseas and did not require customers to have a valid prescription, officials said.

Federal officials said Google knew as early as 2003 that its ad system was allowing Canadian pharmacies to make illegal sales. Shipping prescription drugs into the U.S. from abroad violates drug and other laws, investigators said. If the case had gone to trial, federal prosecutors would have had to prove an Internet search engine helped pharmacies violate federal law.

Google is no longer letting Canadian online pharmacies advertise to U.S. consumers.

Defense attorney George J. West said Whitaker logged 1,100 hours helping investigators. His cooperation also made for a difficult life in the detention facility where he was being held because officials separated him from the general inmate population, said West, adding Whitaker "rarely even got to see the actual sun." Whitaker also has medical conditions that West declined to specify.

"It was complicated work. This was not work anyone could have done," West said.

Massachusetts attorney Joseph Balliro Jr., who represents Whitaker on a different fraud case there, described him as "brilliant." He said Whitaker brought millions of dollars in earnings to small companies he worked for before he was accused of stealing from them. When Whitaker is released from prison, Balliro said he plans to hire him to do information technology work at his Boston law firm.

Smith said Whitaker still needed to be punished for his crimes. Whitaker pleaded guilty in 2008 to wire fraud, conspiracy and other charges.

"Even with the cooperation, you're still going to have to pay the price," Smith said.

Mixitforme began selling discount electronics in 2005 with Whitaker and a partner at the helm. The company claimed it had strong ties to overseas suppliers that made its prices about 30 percent lower than its competitors', officials said. The firm also claimed to be an authorized distributor for Apple and Motorola (News - Alert) and said it had a special arrangement with Sony to sell its products. Federal prosecutors say those were all lies.

But as customers poured more money into Mixitforme, Whitaker blew through Mixitforme's earnings by buying four luxury automobiles, renting a Miami mansion for $200,000 monthly, flying in a private airplane, staying in luxury hotels, renting a yacht and using a limousine driver and security team regularly, according to an affidavit signed by U.S. Secret Service Special Agent Craig Marech.

At the same time, prosecutors say, deliveries slowed and excuses and cover–ups started piling up, such as faked tracking numbers for shipments or claims the goods were being held by customs agents. From July 2005 to March 2006, Mixitforme failed to deliver about $13 million worth of electronic equipment, Marech wrote.

Mixitforme was the latest scheme in a string of criminal accusations against Whitaker that date back more than a decade.

He was arrested in Hawaii in 1997 on charges of bank fraud and e–racketeering. He was sentenced to a year in prison, according to court papers. The next year, he was arrested in New Orleans on a bank fraud charge and sentenced to a year and a day in prison. U.S. marshals also picked him up in 2000 for making forged securities and he was sentenced to 10 months in prison, the affidavit said.

Finally, after federal agents searched the Providence headquarters of Mixitforme, Marech says Whitaker took off for Albuquerque, New Mexico, where he went by the name Slade Austin and set up a company called Coyotego.com that also sold consumer electronics at below–market prices. That business, too, was shut down after a search in July 2007, but by that time Whitaker had already fled to Mexico, Marech wrote.